HickoryTech grows up

HickoryTech, once a 19th-century small-town telephone company, aims to become a 21st-century regional telecommunications firm.

Over the past two decades, the Mankato-based firm has expanded from its local phone company roots to become a statewide provider of business telephone and Internet services over a growing fiber-optic network. The company's shift to business services was based partly on the assumption -- which proved correct -- that demand for wired residential phone service would decline while competition for home Internet service and consumer cellphone service would become intense, said John Finke, the CEO.

But HickoryTech's ambitions and performance haven't been widely noticed. No Wall Street analysts follow it, and two financial firms that rate its stock pegged it at "hold" and "neutral." Yet last year, it earned $12.1 million on revenue of $162.2 million. And over the last five years, total return to shareholders at the publicly held company topped 103 percent. Meanwhile, the large-cap Standard & Poor's 500 index delivered -1.28 percent.

Finke is philosophical about Wall Street's apparent lack of interest.

"We are known as a small rural phone company, even though we're trying to help everybody understand that we are a much larger service provider and have done a lot to diversify," Finke said. "It's hard to understand our full story."

The full story goes back more than a century, when the firm was founded in 1898 as the Mankato Citizens Telephone Co. At the time, most of Minnesota's rural areas lacked telephone service, and dozens of hometown phone companies grew up to serve the need. Minnesota still has about 80 of these small, community-oriented phone companies.

The Mankato company had bigger ambitions. It adopted the folksy-sounding but geographically neutral HickoryTech name in 1985, when it was still primarily a local telephone company in southern Minnesota and parts of Iowa.

Today, HickoryTech has 460 employees, 287 of them in Mankato and 120 in the Twin Cities, where the company has facilities in Minneapolis, Plymouth and Edina, said Jennifer Spaude, a spokeswoman. Other employees are in Duluth, Rochester and parts of Iowa.

Fiber-optic network

But its efforts to become a regional player are still a work in progress. HickoryTech has a 2,750-mile fiber-optic cable network, but most of it is still in Minnesota, with much smaller portions in North and South Dakota, Iowa and Wisconsin.

The company's latest expansion is also in Minnesota: An additional 430 miles of high-capacity fiber optic communications cable that's being financed with a $16.8 million federal broadband stimulus grant and $7.2 million of HickoryTech's own money.

"We're bringing broadband to parts of Minnesota that are underserved," Finke said. "Without the stimulus funds, we would not have been able to see a financial payback on this in a reasonable time frame."

If business and government customers use the network addition, HickoryTech can afford to extend branches of the network to individual communities, said Carol Wirsbinski, HickoryTech's chief operating officer.

"Small cities in Minnesota will eventually benefit from the network, even though they weren't part of the original plan," Wirsbinski said.

But the company's growth has had mixed results. In October, HickoryTech was named one of Forbes magazine's 100 Best Small Companies. But while some Twin Cities small business customers are happy with their telephone and Internet service, others say HickoryTech has sometimes oversold its capabilities.

Allegis Corp., an 80-employee industrial distributor of door latches, handles and hinges based in Spring Lake Park, was able to triple its Internet speeds through HickoryTech without much increase in monthly cost, and was able to better manage its telecommunications costs between offices in the U.S., Canada, Mexico and Germany.

"They've been very proactive in helping me manage costs," said Scott Holum, executive vice president of sales and operations. "They brought customer service, and I appreciate that."

Not so thrilled is Jeff Buelt, IT manager at Hawkins Inc., a Minneapolis-based manufacturer of bulk chemicals with 350 employees.

"With our own network monitoring tools, we noticed when the circuits were down before HickoryTech did, and then we'd have to contact them and they weren't very good at resolving the problem," Buelt said.

HickoryTech really has several kinds of business customers: Small to medium-sized firms that need phone and Internet services, schools and medical institutions with multiple locations, and big national telephone companies that need someone like HickoryTech to relay their phone calls and data transmissions to outstate Minnesota, Finke said.

The latest customers are cellular telephone companies that need fiber connections to their antenna sites to handle the increased data load from smartphones and other mobile devices. (Most consumers may not realize it, but their cellular calls travel from one cell tower to another via telephone line.)

After 113 years that have seen a lot of other telephone companies come and go, HickoryTech plans to keep growing.